Harrah’s High Payoff from Customer Information

Harrah’s business strategy and the use of information technology are unique in the gaming industry and are more like the approaches taken in retail and financial services. The results are impressive and other casinos are copying some of Harrah’s more discernable methods. Harrah’s stock price has risen in response to a doubling of the company’s earnings over the past year. The creation of the Harrah’s brand, Total Rewards, and cross marketing have resulted in a 72 percent internal rate of return on investments in information technology.

The effectiveness of Harrah’s closed loop marketing approach can be seen by how it has affected “same-store sales” (i.e., gambling revenues at a single existing casino). In 1999, Harrah’s experienced truly significant “same-store sales” revenue growth of 14 percent, which corresponds to an increase of $242 million over 1998. Harrah’s grew revenues faster than their competition almost everywhere they do business – in some cases doubling and even tripling the market average of “same-store” sales.

Same-store sales growth is a manifestation of increased customer loyalty, which is driven by three key contributors to business value: (1) frequency of visits, (2) profitability per visit, and (3) cross-market play. Consider some specific examples of improvements in these areas.

H arrah’s is successfully increasing trip frequency from a segment of customers who have historically visited its properties infrequently. Before the marketing campaign, customers visited Harrah’s casinos in the central region of the country (i.e., the central division) 1.2 times per month. After customizing the offer, and tailoring the message, Harrah’s is now receiving 1.9 trips per month from these same customers. And, more customers are visiting as represented by the percent of customers visiting; see Figure 8.

The effectiveness of Harrah’s direct mail program has been significantly enhanced. This is illustrated by a recent campaign for Harrah’s property in Tunica, where Harrah’s more than doubled the profitability per customer visit; see Figure 9.

Figure 9: Impact of Direct Mail Program on Profitability in Tunica, MS

Figure 10 demonstrates Harrah’s success at getting customers to play at more than one Harrah’s casino. Over the last two years, the percentage of total revenues generated from cross-market play went from 13 percent to more than 22 percent. At the Harrah’s Las Vegas property, the contribution to revenues from cross-market play more than doubled, growing from $23 million in 1997 to $48 million in 1999. This increase came during a time when room supply nearly doubled in Las Vegas with the development of new luxury casinos (e.g., the Bellagio, Venetian, and Mandalay Bay) at a capital investment of over $3.5 billion.

Figure 10: Cross-Market Play (Aggregate)